Sunday

Sellers remained mostly scarce and selective — the great bulk of the crop is committed and little is left to hedge — as cotton futures rocketed to three new all-time highs last week.

The market soared for the week ended Thursday to gains of 1,645 points to 169.39 cents in spot March, 1,616 points to 163.43 cents in May, 1,461 points to 154.97 cents in July and 826 points to 113.96 cents in December 2011. All were new contract high closes.

Profit-taking pulled the market off the highs after March rocketed to the new all-time high at 172.83 cents, up 24 percent from the low of week before last. Panic short-covering contributed to support as prices moved up the daily limits in all but one of eight sessions.

March climbed to within five ticks of the limit on Tuesday before reversing from what was then a record high to close just below unchanged in wild price action featuring sudden surges and a huge 988-point trading range, widest since Nov. 10.

Cotton, up 17 percent on a closing basis year to date, is the top performer in the 19-commodity Reuters-Jefferies CRB Index. It also led the global benchmark for commodities in 2010 with a gain 92 of percent.

Overheated momentum readings and concerns that China may raise interest rates ahead of the Lunar New Year in an effort to rein in inflation encouraged sporadic profit-taking. China’s cotton markets will be closed Feb. 2-8.

News that India had indicated it will tighten its economy as much as needed to fight inflation already had fanned concerns about rising interest rates in Asia. The move by India, like earlier action by China, raised fears that liquidity in global markets will shrink.

Yet demand for cotton has remained amazingly strong, despite concerns about the long-range effects of these sharply higher prices on market offtake. U.S. export sales for delivery this season and next totaled a whopping 532,500 running bales during the week ended Jan. 20 for delivery this season and next.

Shipments hit a marketing year high of 394,800 running bales, topping the weekly average — now roughly 370,300 bales — needed to reach the estimate for the first time. This brought exports for the season to 5.312 million bales, 35 percent of the forecast.

Domestic mill cotton consumption also continued to strengthen. Mills consumed cotton at a seasonally adjusted annualized rate in December of 3.819 million statistical bales, largest since Nov. 2008. The rate jumped 9.6 percent from December 2009.

Cash grower prices also soared on The Seam, hitting a record high there of 150.87 cents, with premiums over loan redemption rates at a record 104.43 cents. Prices advanced 921 points to an average of 150.87 cents, reflecting a 1,006-point gain to 97.03 cents in premiums.

World values as measured by the Cotlook A Index hit new all-time highs as well and ended Thursday morning at 194.50 cents, up 1,680 points from a week earlier. Physical prices maintained a wide average premium over prior-day March futures settlements of 28.33 cents.

Looking ahead, Memphis-based Informa Economics projected U.S. cotton plantings of 13.335 million acres, up 21.5 percent from 10.973 million last year. This would be the largest cotton area since 2006 when producers planted 15.274 million acres.

The forecast is up 294,000 acres from the analytical firm’s December estimate. The planted area could produce a crop projected at 20.4 million bales, up from 18.32 million bales in 2010-11.

John Bondurant, a Delta grower and trader based in Memphis, says the new-crop December contract has changed the profitability of cotton versus grains in the Delta.

“It looks to me like cotton is at least $100 per acre more profitable on irrigated ground than beans or corn,” he said.

Informa projected increases of 540,000 acres in the Delta, 543,000 in the Southeast, 1.17 million in the Southwest and 59,000 in the Far West.

South Texas cotton growers got timely, drenching rains totaling up to 4 inches at Brownsville weekend before last. Much of the region received up to 2 inches, while up to 4 inches fell in eastern Texas. The remainder of the state got little or no rainfall.

The mostly slow, soaking rains were especially timely in the Lower Rio Grande Valley, where cotton planting typically begins Feb. 1. Most cotton there is planted between Feb. 15 and March 15. The three-month period through December was the driest on record for South Texas.

Eagerly awaited results of the National Cotton Council’s annual planting intentions survey will be unveiled on Feb. 5 at a joint meeting of program committees at the NCC convention in San Antonio.

In a departure from previous practice, the intentions will not be released at the annual meeting of the American Cotton Producers unit on Feb. 4. The survey aids with industry planning and policy deliberations.

Meanwhile, index funds sold a net 8,086 lots in cotton futures with options during the week ended Jan. 18 to bring their net three-week selling during their annual rebalancing to 15,346 lots, according to traders-commitments data from the Commodity Futures Trading Commission.

This reduced their net long position to 43,099 lots, smallest since data became available in January 2006. Trend-following funds bought a net 631 lots to hike their net longs to 44,223 lots, while traders with non-reportable holdings bought a net 444 lots to raise their net longs to 10,398 lots.

Commercials covered 5,307 shorts and added 1,706 longs to reduce their net short holdings by 7,013 lots to 97,719. This was their smallest net short position since last July 20.

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